What does 'Compound' mean
The ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings.
Also known as "compound interest."
BREAKING DOWN 'Compound'
Suppose you invest $10,000 into company XYZ. The first year, the shares rises 20%. Your investment is now worth $12,000. Based on good performance, you hold the stock. In Year 2, the shares appreciate another 20%. Therefore, your $12,000 grows to $14,400. Rather than your shares appreciating an additional $2,000 (20%) like they did in the first year, they appreciate an additional $400, because the $2,000 you gained in the first year grew by 20% too. If you extrapolate the process out, the numbers can start to get very big as your previous earnings start to provide returns. In fact, $10,000 invested at 20% annually for 25 years would grow to nearly $1,000,000 (and that's without adding any money to the investment)!
The power of compounding was said to be deemed the eighth wonder of the world  or so the story goes  by Albert Einstein.
How Compounding Works
The formula for calculating compound interest is:
Compound Interest = Total amount of Principal and Interest in future (or Future Value) less Principal amount at present (or Present Value)
= [P (1 + i)^{n}] – P
= P [(1 + i)^{n} – 1]
(Where P = Principal, i = nominal annual interest rate in percentage terms, and n = number of compounding periods.)
Take a threeyear loan of $10,000 at an interest rate of 5% that compounds annually. What would be the amount of interest? In this case, it would be: $10,000 [(1 + 0.05)^{3}] – 1 = $10,000 [1.157625 – 1] = $1,576.25.
When calculating compound interest, the number of compounding periods makes a significant difference. The basic rule is that the higher the number of compounding periods, the greater the amount of compound interest.
If the number of compounding periods is more than once a year, "i" and "n" must be adjusted accordingly. The "i" must be divided by the number of compounding periods per year, and "n" is the number of compounding periods per year times the loan or deposit’s maturity period in years.
Investor.gov, a website operated by the U.S. Securities and Exchange Commission, offers a free online compound interest calculator. The calculator is fairly simple, but it does allow inputs of monthly additional deposits to principal, which is helpful for calculating earnings where additional monthly savings are being deposited.

Compound Interest
Compound interest is interest calculated on the initial principal ... 
Compounding
Compounding is the process in which an asset's earnings, from ... 
Discrete Compounding
Discrete compounding refers to the method by which interest is ... 
Stated Annual Interest Rate
A stated annual interest rate is the return on an investment ... 
Biotech Compound
A biotech compound is a chemical identified by scientists as ... 
Cumulative Interest
Cumulative interest is the sum of all interest payments made ...

IPF  Banking
How Interest Rates Work on Savings Accounts
Here's what you need to know to grow your rainyday fund. 
IPF  Banking
APR and APY: Why Your Bank Hopes You Can't Tell The Difference
Do you know the difference between Annual Percentage Rate and Annual Percentage Yield? Check out how they can affect your own account balance. 
Retirement
Compounding Is Important in the Later Years Too
The power of compounding is even greater in the later years of saving for retirement. 
Investing
4 Ways Simple Interest Is Used In Real Life
Simple interest works in your favor when you're a borrower, but against you when you're an investor. 
Investing
How to calculate your investment return
How much are your investments actually returning? The method of calculation can make a significant difference in your true rate of return. 
Investing
Let the Power of Compounding Increase Your Investments
The power of compounding can exponentially increase the value of your investments over time. 
Investing
How to Make the Time Value of Money Work for You
How to make the time value of money and power of compounding work for you. Here's a hint: Start saving now. 
Investing
Investing $100 a month in stocks for 30 years
Find out how you could potentially earn hundreds of thousands of dollars just by investing $100 a month in stocks during your working years.

How do I calculate compound interest using Excel?
Learn how to calculate compound interest using three different techniques in Microsoft Excel. Read Answer >> 
How do I use the rule of 72 to calculate continuous compounding?
Find out why the rule of 72 does not accurately reflect the growth caused by continuous compounding, and which number can ... Read Answer >> 
Simple versus compound interest
Different methods in interest calculation can end up different interest payment. Learn the differences between simple and ... Read Answer >> 
Compound interest versus simple interest
Simple interest is only based on the principal amount of a loan, while compound interest is based on the principal amount ... Read Answer >> 
Stated Annual Return vs Effective Annual Return
The difference between these two measures is the effective annual return accounts for intrayear compounding, and the stated ... Read Answer >>